Low-cost phones ignite high-grade competition

Mobile brands eye connections in developing world

Microsoft Devices Group unveiled Monday the Nokia 130, a $25 mobile phone. According to Microsoft, which purchased the Finnish company's devices and services division earlier this year, its new low-cost "feature phone" will be aimed at first-time mobile phone buyers in developing countries as well as those looking for a backup handset.

Reports say the device will start shipping sometime in the third quarter, when it will be made available to consumers in India, China and Nigeria. According to analysts, if all goes well with Nokia's ultra-budget handsets, these devices could steer buyers toward more expensive Nokia phones, such as the $54 Internet-enabled 225.

Not that long ago, Nokia was the largest mobile phone brand in the world. Its fortunes have waned considerably though with the rise of high-end smartphones from Apple and Samsung. At the same time, the lumbering giant is facing increasingly fierce competition from value-priced handsets offered by Lenovo, Huawei and Xiaomi in China as well as Micromax in India.

Nokia's push into frontier markets with its aggressively priced 130 handset looks like a wise move considering that there are still an estimated 1 billion people in the world who have never owned a mobile phone. Moreover, as Microsoft reportedly noted, some 300 million sub-$35 dollar handsets are sold globally every year. Still, in the world's hotly contested developing market, the company won't find it easy to push back its rivals.

Nokia is not the first phone brand to look for opportunities in developing nations as demand in mature markets levels off. Chinese telecoms equipment manufacturer Huawei, for instance, is rapidly making inroads outside of its home market. The company shipped 34.27 million smartphones to the international market in the first half of this year, up 62 percent year-on-year, according to media reports. By region, deliveries surged 550 percent in the Middle East and Africa, 275 percent in Latin America and 180 percent in Asia-Pacific.

Meanwhile, mobile phone markets in many developed countries are approaching their saturation point. Lenovo, for instance, is reportedly counting on emerging markets, as well as consumers in the developing world, for future growth opportunities.

If anything, Lenovo's strategy echoes prevailing industry wisdom, which says that the next big upsurges in mobile phone demand are expected to originate in South America, Africa and the Middle East. But to capitalize on the expected boom, companies will need the right products. Naturally, range-topping premium smartphones that cost several hundreds of dollars will simply not make sense for many of the emerging-market consumers who have not yet joined the mobile revolution.

According to data released by consulting firm Canalys, global smartphone shipments reached 279.4 million units in the first quarter, up 29 percent year-on-year. The data also showed Samsung surpassing Apple to become the world's largest deliverer, accounting for 31 percent of total shipments during the three-month period ending March. On the duo's heels were an eager triumvirate of Chinese up-and-comers: Huawei, Lenovo and Xiaomi.

Low- and middle-grade handsets from China and elsewhere are having a major impact on the mobile phone market. Indeed, it seems that inexpensive feature-packed phones - particularly smartphones - are already starting to undercut the position of the world's top manufacturers.

A recent report from Fitch Ratings contains predictions that Apple's share of the global smartphone market will decline from 15 percent in 2013 to 14 percent in 2015, while Samsung could slide from 31 percent in 2013 to 25 percent in 2015.

Samsung was also reportedly dethroned as the most popular smartphone brand in China and India in the second quarter. During the same period, the consumer tech giant's operating profits declined 24.45 percent year-on-year, mainly due to weak smartphone sales, company data show.

To stay competitive, the world's leading mobile device brands will have to focus on delivering quality, reasonably priced products to consumers in emerging markets. And as more brands pile into this increasingly important corner of the global market, aggressively priced handsets will be central to building market share.